MI tax deduction should be made permanent

Since 2007, homeowners have been able to deduct from their federal income taxes mortgage insurance premiums paid to private MI companies and government agencies, including the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), and U.S. Department of Agriculture (USDA) Rural Housing Service (RHS). From 2012-2016 more than 4 million homeowners annually claimed the MI premium tax deduction, and in recent years millions of homeowners continued to benefit from this tax provision. This important tax policy supports low- and moderate-income homeowners. In 2020, qualifying middle-class homeowners received an average deduction of more than $2,100, according to IRS data.

Tax Deductibility

Tax deduction for MI premiums has been extended several times

Most recently in December 2020 as part of the Consolidated Appropriations Act of 2021, which covered tax filings for 2020 and 2021. USMI is once again calling on Congress to support existing homeowners and prospective homebuyers by extending the deduction and making it permanent. While this deduction has benefited millions of homeowners since 2007, its effectiveness is diminished by:

  • Its temporary nature
  • Its adjusted gross income (AGI) phaseout

The ability of borrowers to deduct MI premiums from federal income taxes should be made permanent because MI premiums are the economic equivalent of mortgage interest payments, and so should remain deductible and at parity with mortgage interest payments. Further, the existing AGI phaseout should be increased or eliminated since the mortgage insurance premium deduction is the only itemized deduction subject to such a cap and the phaseout has never been adjusted.

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